The city paid $5,950 – or $200 an hour — for the third-party analysis of Real Development’s controversial Exchange Place condo project in downtown Wichita.
The analysis was at the heart of the complicated and lengthy debate that led council members to increase public financing from $9.3 million to $10.3 million. While the report was widely discussed, the council ultimately decided to move forward despite risks outlined in several scenarios in the analysis.
So how was the report funded? It’s a bit complicated.
The city already gives 1.5 mills — or about $5.5 million — to Wichita State University each year for a variety of programs and services. It’s a long-standing partnership. The funds include $112,500 devoted to “business and economic research.”
The city planned to use the mill levy money, according to Allen Bell, the city’s director of urban development. But, because of the rushed nature of the analysis and the need for approval at multiple levels at WSU, the city independently contracted with Stanley Longhofer, director of the Center for Real Estate.
Longhofer’s payment came from the city’s development and research fund, which has a budget of $75,000. Longhofer spent about 29 hours on the 9-page report, the city reported in response to The Eagle’s inquiry.
Longhofer said that the $200-per-hour rate is his standard consulting rate. The city agreed it was fair.
“Based on our experience working with consultants and understanding the magnitude of the undertaking, we felt that the fee proposal was reasonable,” Bell wrote in an e-mail.
Longhofer’s report looked deep into Real Development’s proposal, the city’s modeling for tax increment financing, historical occupancy rates, appraisal data and other risk factors. He outlined several scenarios, calculated debt service coverage ratios and projected property tax revenues that would pay the city back for its investments.
Longhofer said he tried to offer scenarios that were cautious and ones that were very optimistic. But even his most optimistic scenario fell short of the city’s standards, which call for property tax revenues to pay off bonds and have a 20 percent buffer to protect the city from unforeseen problems. The city council, citing the project’s importance to downtown redevelopment, went forward anyway. It was a 5-2 vote.
Longhofer did not know that Real Development’s last minute dealings would lead to an injection of $900,000 more in private money. But even after that he said he was “surprised” that the council struck a deal.
“It was more aggressive than assumptions I thought were aggressive to begin with,” he said.
City Council members are expected to finalize the $10.3 million in tax increment financing at their 9:30 a.m. meeting Tuesday. Based on their initial vote last week, the second vote will include $900,000 more from Real Development ($700,000 from an unnamed investor and $200,000 cut from their profits). But the city has not yet posted the agenda, which would likely include a revised report.